The Business Insurance Bureau

Marine Cargo Insurance

If you’re an exporter who has not been paid for the goods at the time of shipment, or an importer who has paid for all or part of the goods prior to receiving them, you run the risk of suffering a financial loss if the goods are lost or damaged during transit.

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Introduction

A contract of Marine Insurance is a contract whereby the Insurer undertakes to indemnify the assured against losses incident to Marine Cargo adventure. There are a number of different policies available and it would depend upon the nature and frequency of shipments as to which was most suitable for you and your business.

Frequently Asked Questions

Why should I purchase ocean cargo insurance?

The simple answer is to reduce your exposure to financial loss. If you’re an exporter who has not been paid for the goods at the time of shipment, or an importer who has paid for all or part of the goods prior to receiving them, you run the risk of suffering a financial loss if the goods are lost or damaged during transit.

Additionally, you may be required to post a bond and/or cash deposit in order to obtain release of your cargo following a general average even though there was no loss or damage to your goods. By purchasing insurance, your insurance company assumes the responsibility and can usually expedite the release of your cargo.

What is general average and why would I incur costs if my goods are not damaged?

General Average is an internationally accepted principle of equity dating back to ancient times. Essentially, if one or more interests involved in a maritime adventure voluntarily sacrifices all or part of their goods to save all interests from an impending peril or loss, the interests saved will reimburse the interest suffering the loss so that each shares the loss equally.

A classic example used to illustrate this principle is that of a vessel which runs aground in a storm and is threatened with loss of the entire vessel and its cargo unless the vessel can be refloated. Efforts to refloat the vessel–such as the jettison of cargo to lighten the vessel; or expenses paid to a salvor to pull the vessel off the grounding point–would be shared by the vessel and all cargo interests.

Do I need to purchase insurance only when I’m responsible for providing insurance?

It depends on the extent of the insurance provided by the seller, or other party, and whether or not you have already paid for all or part of the goods. Some questions to ask of yourself: Does the other insurance cover from the original place of origin until arrival at my premises?

If not, you may need insurance to fill in the gaps. Are you satisfied with the coverage–insuring terms, valuation and limits–provided by the other party, and the ability of that insurer to settle claims fairly and promptly and to adjust claims directly with you at destination? If not, you may wish to obtain contingency insurances such as guarantee of collectability, difference in conditions, increased value or difference of limit.

Does equipment have to be shipped using a specific carrier?

When you ship through Distribution, you are insured up to the $10,000,000 limit regardless of whether it is shipped via air freight or commercial trucking company, and Mail-parcel post.

What is a Marine Cargo Insurance Buyer’s Contingency Policy?

When the terms of sale include insurance coverage up to the title transfer of goods, the buyer may purchase additional insurance from the provider known as a contingency policy. A contingency policy will provide insurance coverage for the goods once the title has transferred and the goods are no longer covered under the seller’s insurance policy. If goods are damaged upon arrival to the buyer and the title has transferred, the policy would pay the damage and the buyer’s insurance company would subrogate against the seller’s insurance.

What if I already have a Cargo/Shipping Insurance Policy?

We negotiate very favorable terms with our cargo insurance carriers and would be pleased to offer you a free, no obligation comparison. By arranging cargo/shipping insurance in volume, our rates and terms are very competitive.

Doesn’t my Transportation Carrier pay my losses?

Your transportation carrier will pay your losses only if you purchase specific cargo insurance from them, in these cases the coverage is provided. However, this coverage is usually insufficient and can end up costing you more, as they are not obligated to pay for your losses that occur beyond their control (such as in the case of a General Average Claim).

Can I insure domestic overland shipments under my ocean cargo policy?

Depending upon your specific needs, most insurers will extend their ocean cargo policies to include domestic shipments; provided there are no state insurance regulations prohibiting them from doing so. In the latter instances, insurers can usually arrange a companion domestic transit policy.

Who can submit a claim for cargo damage?

Anybody (broker/agent/shipper/consignee) but if the insurance payment is to be issued to another party having no insurable interest, the party having interest should give written authorization.

Request a Call From an Experienced Broker

What's Covered?

Annual policies

Cover is continuous for all shipments/transits within the agreed scope of the policy. A ‘minimum and deposit is calculated and charged at inception based upon the estimated sendings provided by the client. On expiry of the policy, the actual sending’s are declared premium is adjusted accordingly. The advantages of an annual policy include reduced administration, which can result in cheaper premiums and cover is tailor made for the client with no requirement to declare prior to shipment unless goods are outside the agreed parameters.

Open Cover Policies

Open cover policies are permanent policies without a renewal date and are reviewed on their anniversary date. This type of policy offers permanent cover and there is no minimum premium to be paid, however, the administration is greatly increased and there would be monthly debiting and calculation of premium. Again the insured must also notify the insurers if there are any changes or the sum insured exceeds the maximum policy limit.

Facultative Covers

This type of policy is more suited to those businesses that rarely import or export and issued for one particular shipment. The premium is paid in full as and when cover is required however, there is no automatic cover and the insured is wholly responsible for ensuring that the goods are covered prior to shipment. Often this type of policy will have a higher level of premium.

Stock Throughput Policies

A Stock Throughput Policy is a combination of marine transit, all risks policy and a stock policy and is intended to provide continuation and consistency of cover. Like Marine policies they are tailored to the Insured’s specific business requirements and ensures there are no gaps in cover and little change in cover conditions. The administration is also greatly reduced.

Underwriting Factors

In order to provide a quotation, Underwriters would require an estimated value of goods sent to and from each territory and the maximum limit for any one consignment. Underwriters would also consider the type of cargo being carried, how it is packed, the voyage being undertaken and the method of transport.

They would also need to know the terms of sale; Ex Works, Free on Board (FOB) or Cost, Insurance and Freight (CIF). Ex Works policies provide cover for the goods for the entire journey once they leave the sellers premises.

Free on Board policies are utilised where the seller is responsible for the goods until they are ‘over the ships rails’ where responsibility then shifts to the buyer. Cost, Insurance and Freight policies are used when goods are sold on a CIF basis and the seller needs to arrange full insurance on a ‘warehouse to warehouse’ basis.

Clauses

In cargo Insurance there is a choice of clauses applicable. Institute Cargo Clause A covers ‘all risks’, Clause B covers only a range of specified perils including fire, explosion, stranded or sunk vessel, collision, forsaking of cargo at a location other its destination in the event of an emergency, washing overboard and entry of seawater. Clause C is narrower still and does not insured the last two eventualities.

There are over 150 other Institute Clauses and many of these are tailored to meet the needs of specific trades. A full list of clauses can be found in your policy documentation.

Exclusions

As with any insurance policy there are exclusions and we have highlighted some of these below for you: (A full list of exclusions will be noted on your schedule)

Insufficient or unsuitable packing.

Inherent Vice of the subject matter.

Ordinary leakage, loss in weight or wear and tear.

Loss, damage or expense caused by delay.

Wilful misconduct of the assured.

Financial default of the owners, managers or charterers of the vessel.

Atomic, nuclear or radioactive force.

Unseaworthiness of the vessel.

War, Strikes, riots, civil commotions and terrorism are also specifically excluded although cover is subsequently added back in by the inclusion of the Institute War & Strikes Clauses in the policy.

Institute War Clauses

Provides cover for loss or damage caused by:

War, civil war or hostile act by a belligerent power.

Capture, seizure, arrest or detainment arising from the above.

Derelict mines, torpedoes, bombs or other derelict weapons of war.

General average and salvage charges. Whilst cargo is waterborne or airborne only.

Institute Strike Clauses

Provides cover for loss or damage caused by:

Strikers, locked out workmen, labour disturbances, riots or civil commotion.

Any terrorist or person acting from a political motive.

Terrorism cover is only provided ‘in the normal course of transit’.

Making it cheaper, by doing it right™

Doing it right is more important than making it cheaper, but we make it cheaper because we do it right.

Working With Us

Which Services will we Provide you with

The Business Insurance Bureau conducts both client and market research to identify solutions to the needs of an almost exclusively business clientele. We will make a recommendation once we have assessed your demands and needs.

Payment Terms

All premiums due to insurers must normally be paid by you on or before the date that cover commences. Where alternative methods of payment are available these will be discussed with you so that arrangements can be put in place by the due date.

Confidentiality & Security

We are registered with the Data Protection Registrar. We will ensure that any information obtained from you is treated by us and anyone else involved in arranging, considering to arrange or managing your insurance, as Strictly Private and Confidential. We will not provide your information to anyone else unless we:
have your permission to do so, or -are required to by the FCA, or -are required to do so by law, or -are required to do so in the normal course of arranging or negotiating and maintaining, or renewing financial services products which we may from time to time approve.We take appropriate steps to ensure the security of any money, documents, other property or information handled or held on your behalf.

All information in any form, with the exception of policy documents and certificates issued on behalf of insurers and supplied by us, to you, should be treated as Strictly Private and Confidential and not be released directly or indirectly to any other party, without our explicit consent.

Note: in transacting your insurances with The Business Insurance Bureau, you are deemed to have accepted our Terms of Business. Your accepting of these Terms of Business does not affect your statutory rights.

Claims

You must notify us as soon as possible of a claim and circumstances which may give rise to a claim. In the event of a claim you should contact this office and we will promptly advise you and if appropriate, issue you with a claim form and pass all details to your insurer. You should not admit liability or agree to any course of action, other than emergency measures carried out to minimise the loss, until you have an agreement from your insurer. We will remit claims payments to you as soon as possible after they have been received on your behalf. In the event that an insurer becomes insolvent or delays making settlement we do not accept liability for any unpaid amounts.

Cancellation Rights

You would have the right to cancel a policy within 14 days of its inception or upon receipt of the policy documentation whichever is the later. You would as a Consumer and without providing a reason, cancel the policy by confirming this is in writing to the address of our office through which your policy was placed. Any policy documentation and in particular any legal document, i.e. Certificate of Motor Insurance, Employers Liability Certificate, MUST be returned with your instruction to cancel. By exercising your right to cancel the policy, you are withdrawing from the contract of insurance.

Duration & Termination

Our services may be terminated without cause or penalty by giving one months’ notice in writing. In the event that our services are terminated by you other than at the expiry of the policy we will be entitled to retain any fees and all of the brokerage payable. The responsibility for handling claims reported after the date of termination shall in the absence of an express agreement be the responsibility of the party taking over the role.

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